San Diego City Attorney

Jan I. Goldsmith
NEWS RELEASE
FOR IMMEDIATE RELEASE: November 20, 2015
Contact: Gerry Braun, Director of Communications: gbraun@sandiego.gov (619) 533-4782

Appeals Court Upholds Legality of Lease-Revenue Bonds

Finds no merit in case filed by San Diegans for Open Government
The Citys use of lease-revenue bonds to finance public projects has once again been upheld by the courts, this
time by the Fourth District Court of Appeal.
A unanimous court found no merit in the argument of San Diegans for Open Government (SDFOG) and
attorney Cory Briggs that the widely used financing method was unconstitutional.
The court agreed with the City that the 1996 California Supreme Court case City of San Diego v. Rider had
already covered the identical issues. For the same reason, SDFOG lost this case in Superior Court in November
2014.
The Court of Appeal acted in unusually quick fashion after the City Attorneys Office filed a motion to expedite
the case. The SDFOG lawsuit was an impediment to financing much-needed public infrastructure projects
including fire stations, libraries and storm drains primarily in older and underserved communities.
As the appellate court noted, the issues in this case were settled nearly 20 years ago in Rider, City
Attorney Jan Goldsmith said. Whether or not you like them, lease-revenue bonds are a legal way for
government to pay for public infrastructure projects. This decision clears the way for these long-awaited
neighborhood improvements to move forward.
In both this case and Rider, plaintiffs argued that the use of lease-revenue bonds violated a constitutional
requirement that cities cannot take on multi-year debt without two-thirds voter approval.
In both cases, courts found that lease-revenue bonds issued by a third party in San Diegos case, by the Public
Facilities Financing Authority are not subject to the requirement of a public vote.
The City presumably uses the Financing Authority to avoid the two-thirds vote requirement, but doing so is
legal, the Court of Appeal wrote, echoing the Rider decision.
SDFOG sought to distinguish Rider from its own case by pointing out changes that have occurred since the
Rider decision, such as changes in the Financing Authoritys members.
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However, the Court of Appeal said the distinctions cited by SDFOG were immaterial and not well taken.
SDFOG additionally pointed the Court to new accounting guidelines that recommend the City include
Financing Authority debt on City financial reports. SDFOG argued that the new guidelines amount to a change
the Citys legal relationship with the Financing Authority and will impact the Citys credit rating.
The Court of Appeal found no evidence to support that theory. It wrote that following recommended accounting
guidelines does not override California law or delineate the legal rights and responsibilities of the City, and
that SDFOG predicts economic consequences to the City that do not pertain to the issue under review
The ruling was certified for publication, meaning it is precedent for all California courts.
Briggs and SDFOG lost a nearly identical suit against the City in January. That case was not decided on its
merits, however, but was dismissed with prejudice because it was incorrectly served.
The City was represented by Chief Deputy City Attorney Meghan Ashley Wharton and Deputy City Attorney
Laura M. DePoister.
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Recent City Attorney media releases can be accessed on the San Diego City Attorneys home page located on the Internet at http://www.sannet.gov/city-attorney

1200 Third Avenue, Suite 1620, San Diego, California 92101-4188 (619) 236-6220